European real estate 2026

There are signs that Europe’s commercial property market is stirring back to life after two years defined by subdued deal flow and sharp valuation corrections.

A growing number of transactions, mandates and exploratory discussions across multiple jurisdictions suggest that 2026 may mark the first stage of a broader cyclical rebound. While caution still shapes underwriting and pricing, sentiment has brightened considerably compared with the stagnation that dominated 2023 and much of 2024.

Winds of change in European real estate

Dealmaking volumes, though still around 40 to 45 per cent below the peak years of 2013 and 2014, are projected to rise steadily as capital re‑enters the market, according to a CBRE European Market Outlook from January 2026. The environment is very different to the last investment cycle, when the capital base was narrower and sector focus more traditional.

Europe now benefits from a more diversified investor pool, deeper specialisation across asset classes and a maturing alternative sectors market. This mix may lead to an upswing in both capital deployment and asset creation, with increased appetite for large investors to team up with developers and sector specialists to form joint ventures (something we have seen increasingly over the last year).

Market participants across Europe echo this cautiously optimistic view. Service providers report a marked increase in enquiries, particularly around the formation of new investment structures, cross‑border vehicles and transaction support.

Several real estate transactions that we are actively engaged on illustrate the breadth of capital now operating in the market, as well as the varying sectors that have become attractive outside the “beds and sheds” (residential and logistics) that have dominated in recent years. There is appetite for acquisitions of large shopping centres, portfolios of industrial, office (including regional offices again), retail assets, and specialist residential housing platforms.

Many of these involve multi‑jurisdictional structuring, with investors continuing to rely on well‑established European fund domiciles for governance, administration and regulatory oversight.

Retail

The retail sector stands out as one of the most closely watched segments. Having undergone a painful repricing over the last decade, prime shopping centres and retail parks are once again attracting institutional interest.

Yields have shifted to levels that many investors now interpret as offering genuine value, particularly where assets benefit from strong anchor tenants or are located in densely populated catchments. While operational challenges remain, retail’s re‑entry into investor strategies underscores a broader willingness to revisit sectors previously considered out of favour.

Living sector

Residential remains another area of sustained demand, especially where constrained supply underpins rental growth. Specialist living sectors, including purpose‑built student accommodation and single‑family rental housing, continue to draw both domestic and international capital. Investors point to demographic resilience and the chronic shortage of modern stock as compelling characteristics, even as financing costs remain above long‑term norms.

Viability challenges still remain for many developments, and the delays caused by building safety regulator approvals for higher risk buildings impact on delivery and investor appetite to commit to high rise buildings.

However, public sector bodies in the UK have also shown greater willingness to collaborate with private capital to unlock stalled development sites, indicating a shift towards more pragmatic delivery models.

Hotels, meanwhile, are benefiting from structural shifts in travel patterns and the resurgence of international tourism. The sector’s income profile, which tends to rebase more quickly than that of offices or logistics, has helped sustain appetite among long‑term investors. Several advisers note that hotel operating performance in parts of Europe has exceeded pre‑pandemic levels, strengthening underwriting confidence.

Industrial and logistics

Having been one of Europe’s most resilient real estate sectors over the past five years, logistics and industrial assets continue to show signs of stability as the market moves into 2026. Improving macroeconomic conditions, easing inflation and recovering consumer demand supported improved leasing activity toward the end of 2025.

Investment volumes have rebounded sharply and a slowdown in speculative development is helping to stabilise vacancy levels. With demand for modern, sustainable space in prime locations remaining strong and capital continuing to return, the sector remains a core focus for investors, with greater focus recently on the multi-let industrial units as opposed to the big box logistics developments.

Infrastructure

Perhaps the most dynamic area of the market is data infrastructure. Data centres, a relatively niche asset class, have surged in prominence as demand for processing power accelerates. Artificial intelligence applications, cloud expansion and edge computing requirements have created unprecedented pressure on power availability and land suitable for large‑scale facilities.

Investment managers are increasingly integrating data infrastructure strategies into broader real assets platforms, reflecting both the cyclical and structural drivers behind the sector.

Offices

Offices remain the most polarising asset class. While the best‑in‑class buildings with strong sustainability credentials continue to capture interest, large parts of the secondary stock face ongoing viability challenges.

Even so, investors searching for rental growth cite the constrained supply of high‑quality space in core European cities as a potential opportunity, particularly where refurbishments can reposition buildings to meet future regulatory and ESG standards.

Building resilience versus geopolitical headwinds

Alongside sector-specific trends, administrative and legal complexity continues to play a critical role in European real estate. As cross-border investment structures become more layered and capital is deployed through multiple entities, robust governance and technical accuracy remain essential to protecting deal integrity and maintaining momentum.

Geopolitical uncertainty still dominates the headlines, and just as last year the tariff wars subdued the early part of 2025, the situation in the Middle East also has the potential to create a spike in energy costs and materials. Investors and asset managers alike may have become more accustomed to the relentless geopolitical headwinds and accept that they can’t sit on the sidelines but will have to work through these risks to achieve the rewards.

If early optimism is borne out, 2026 could become the year the European real estate market transitions from tentative recovery to measured expansion.

The fundamentals remain uneven, but the direction of travel is clearer: capital is returning, transaction pipelines are building and investors are beginning to position for the next phase of the cycle.